Intercity Passenger Rail:
National Policy and Strategies Needed to Maximize Public Benefits from Federal Expenditures
GAO-07-15: Published: Nov 13, 2006. Publicly Released: Dec 13, 2006.
Intercity passenger rail service is at a critical juncture in the United States. Amtrak, the current service provider, requires $1 billion a year in federal subsidies to stay financially viable but cannot keep pace with its deteriorating infrastructure. At the same time, the federal government faces growing fiscal challenges. To assist the Congress, GAO reviewed (1) the existing U.S. system and its potential benefits, (2) how foreign countries have handled passenger rail reform and how well the United States is positioned to consider reform, (3) challenges inherent in attempting reform efforts, and (4) potential options for the federal role in intercity passenger rail. GAO analyzed data on intercity passenger rail performance and studied reform efforts in Canada, France, Germany, Japan, and the United Kingdom.
The existing intercity passenger rail system is in poor financial condition and the current structure does not effectively target federal funds to where they provide the greatest public benefits, such as transportation congestion relief. Routes of 750 miles or more, while providing service for some rural areas and connections between regions, show limited public benefits for dollars expended. These routes account for 15 percent of riders but 80 percent of financial losses. "Corridor" routes (generally less than 500 miles in length) have higher ridership, perform better financially, and appear to offer greater potential for public benefits. The countries GAO studied varied in their reform approach, but their experience shows the United States needs to consider three key elements in attempting any reform: (1) define national policy goals, (2) define the roles of government and other participants, and (3) establish stable funding. Countries found these elements important in setting the role of passenger rail in the national transportation system and increasing the benefit from investing in passenger rail. Currently, however, the United States is not well positioned to address these key elements. The goals or expected outcomes of intercity passenger rail policies are ambiguous, participants' roles are unclear, and there is widespread disagreement about the level of funding to devote to this effort. Amtrak is taking actions within its authority to reduce costs and increase efficiency, but Amtrak is not in a position to address all key elements. To undertake reform, federal leadership is needed. Addressing key elements of reform poses many challenges, because those who have a stake in the process have divergent goals or points of view. Amtrak workers, freight railroads that own much of the rail system over which passenger trains operate, and federal and state governments would be among those affected. The diversity of viewpoints poses challenges for determining both the overall goal for passenger rail in the United States and the federal role in achieving this goal. Funding-related challenges include identifying how to pay for achieving these goals and how to overcome disadvantages intercity passenger rail faces relative to leveraging of federal funds. Although federal-state cost sharing is common in highway and transit programs, states face difficulty leveraging their expenditures on rail service. There are four main options for the federal role in intercity passenger rail service: (1) keep the existing structure and funding, (2) make incremental changes to improve financial or operational performance, (3) discontinue federal involvement, or (4) fundamentally restructure the system. Each option has advantages and disadvantages, and each faces its own challenges. Each requires some level of federal funding, a clear articulation of expected goals, and, except for the status quo option, substantial time to implement. Of these options, the fourth--fundamental restructuring--would allow for effectively integrating rail into the national transportation system and substantially improving overall performance and accountability.
Matter for Congressional Consideration
Status: Closed - Not Implemented
Comments: In October 2008, Congress passed and the President signed the Passenger Rail Investment and Improvement Act of 2008 (PRIIA). PRIIA was a comprehensive reauthorization of intercity passenger rail. Among other things, this law reauthorized funding for the National Railroad Passenger Corporation (Amtrak) for 5 years, articulated a broad mission for Amtrak, expanded Amtrak's Board of Directors from 7 to 9 members, required that a "modern" financial accounting system be implemented within 3 years of passage of the act, and required Amtrak, in conjunction with the Federal Railroad Administration, Surface Transportation Board, and others to develop performance measures for Amtrak's services, including individual routes. The act also established a high speed rail program and made Amtrak's Northeast Corridor eligible for high speed rail funds. However, the act did not change the basic structure of how intercity passenger rail service is currently provided and funded, nor conduct an assessment of how such service can best be provided soliciting the input of all stakeholders. The act also did not evaluate the transportation and public benefits of intercity passenger rail service and how federal investments could best maximize these benefits. Consequently, while PRIAA provided for a number of improvements in rail transportation, it did not provide for the recommended comprehensive evaluation of intercity passenger rail, its structure, and how to maximize transportation and public benefits.
Matter: In order to address longer term needs to maximize the transportation benefits and public benefits of intercity passenger rail service and any federal funds expended on this service, Congress may wish to consider restructuring the approach for the provision of intercity passenger rail service in the United States. Only Congress can provide the national vision and has the authority to put in place a wide-ranging restructuring effort. This restructuring should include establishing clear goals for the system, defining the roles for states and the federal government, if any, commuter rail agencies, freight railroads and other stakeholders, focusing expenditures where they will achieve the most public benefits, and developing funding mechanisms that include cost sharing between the government and beneficiaries. In undertaking this restructuring, it will be important to solicit input from all stakeholders, particularly the Department of Transportation (DOT) and the Federal Railroad Administration given their responsibility for transportation and rail matters. Evaluation of restructuring approaches should also consider the relationship between passenger and freight railroads and give due consideration to the national freight transportation policy being developed by DOT. Due to the complex nature of intercity passenger rail issues and the wide diversity of views about the future of intercity passenger rail service, an independent and properly designed commission may be an effective mechanism for developing a consensus over the future of intercity passenger rail service and helping determine a restructuring approach. By addressing the key reform elements, Congress can create a structure that not only efficiently and effectively serves travelers but also promotes performance and accountability and the chance for increased transportation and public benefits from federal expenditures for intercity passenger rail.
Recommendation for Executive Action
Status: Closed - Implemented
Comments: Amtrak officials reported that Amtrak has acted to strengthen its accountability by endorsing two key practices referred to in our report--it has begun including a Management Discussion and Analysis with its financial statements in its annual report and it makes its independent auditor's report on internal controls and compliance publicly available. These improvements were included in the evaluation Amtrak performed in 2011 of its financial reporting, internal control, and governance requirements applicable to public companies and federal entities called for by our recommendation. While Amtrak did not create a formal plan to implement the recommendations made by the evaluation, most of the improvements called for in the recommendation were made prior to the evaluation being performed. As such there was no plan to submit to Congress. As a result, this recommendation was closed as implemented.
Recommendation: To improve Amtrak's financial and internal control reporting and overall accountability, the president of Amtrak should immediately take steps to evaluate Amtrak's accountability--particularly its financial reporting, internal control, and governance practices--and formulate a plan to bring the financial reporting, internal control, and governance practices in-line with the basic requirements that federal entities or public companies practice, while also identifying opportunities to improve and streamline current reporting practices. The evaluation should include a comparison of Amtrak's current accountability requirements and practices to those of federal entities as well as public companies. This evaluation should serve as the basis for the formulation of Amtrak's plan to bring Amtrak's financial reporting, internal control, and governance practices in-line with the basic requirements that federal entities and public companies practice, based on a determination of which practices are most appropriate given Amtrak's overall mission, funding sources, and current situation. The plan should include developing management discussion and analysis as part of its annual financial reporting and developing management's assessment of internal control over financial reporting, while identifying opportunities to streamline other reporting practices. The plan should be submitted to Amtrak's Congressional oversight committees.
Agency Affected: National Railroad Passenger Corporation (AMTRAK)